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Tax credit for a Québec film production
A corporation may claim the tax credit for a Québec film production with regard to the qualified labour expenditures that it incurs and pays for the production of a Québec film (within the meaning of the Regulation respecting the recognition of film as Québec films). This refundable tax credit is jointly administered by Revenu Québec and the Société de développement des entreprises culturelles (SODEC).
Revenu Québec is responsible for determining whether a corporation is eligible for the tax credit, calculating the amount of the credit and paying the credit. SODEC is responsible for determining whether a production qualifies for the credit.
In order to obtain the tax credit, a corporation must meet the following conditions:
- It is not controlled, at any time in the year or in the 24 preceding months, by one or more persons not resident in Québec.
- It has an establishment in Québec.
- It carries on a film or television production business in Québec.
Before claiming the credit with regard to a production, the corporation must have the production recognized by SODEC, in accordance with the Regulation respecting the recognition of film as Québec films. The corporation may first apply for an advance ruling from SODEC, but this step is optional. The second step, an application for a final certificate, is compulsory.
Whether the corporation is applying for an advance ruling or a final certificate, it must complete the SODEC form Crédit d'impôt remboursable pour la production cinématographique ou télévisuelle québécoise. A separate copy of the form must be filed for each production.
Once a production is recognized for purposes of the tax credit, the corporation must complete the Revenu Québec form Crédit d'impôt pour les productions cinématographiques québécoises (CO-1029.8.35), and file the form with its income tax return. A separate copy of the form must be filed for each production. A copy of the favourable advance ruling or the final certificate issued by SODEC must be enclosed. (The ruling must be valid and the certificate must not have been revoked.) After processing the application, Revenu Québec pays the credit. If the corporation has income tax payable, the amount of the credit is applied to the balance due.
As a rule, the corporation must submit its application for a final certificate to SODEC within 18 months after the end of the taxation year in which the master of the production is completed or the first trial composite of the production is recorded.
In order to obtain the tax credit, the corporation must file form CO-1029.8.35 with Revenu Québec within 18 months after the end of the taxation year in which it filed its application for an advance ruling or, in the absence of such an application, its application for a final certificate.
Nature of the credit
This credit may be claimed with regard to a Québec film production of a corporation that is a film or television production business. The credit is limited to $2,187,500 per film or series.
The basic rate of the tax credit is 39.375% for giant-screen film productions and certain French-language productions. For other productions, the basic rate is 29.1667%, but an additional credit of 10.2083% may be granted for productions that involve computer-aided special effects and animation.
An additional credit may also be granted for regional productions: 9.1875% for French-language productions and for giant-screen film productions; and 19.3958% for other productions.
Corporations that may apply for the credit
In order to claim the credit, the corporation must have an establishment in Québec and carry on a film or television production business in Québec. The corporation must obtain recognition of the production as a Québec film (a certificate or a favourable advance ruling, as applicable) or as a giant-screen production (a certificate) from SODEC.
During the year and the 24 preceding months, the corporation must not have been directly or indirectly controlled, in any manner whatsoever, by one or more persons not resident in Québec.
After March 11, 2003, shares held by persons not resident in Québec must be hypothetically attributed to a hypothetical person. If such attribution means that control of the corporation is given to the hypothetical person, the corporation is considered to be controlled by a person not resident in Québec.
The following corporations are not eligible for the credit:
- a corporation that has a broadcasting licence issued by the Canadian Radio-television and Telecommunications Commission (CRTC) or that, at any time in the year or the 24 preceding months, was not dealing at arm's length with a corporation that holds such a licence (this measure applies to taxation years beginning after March 31, 2003)
- a corporation that is exempt from tax for the year
Residency requirement
The salaries and wages claimed for the credit must have been incurred with regard to individuals who were resident in Québec at some time during the taxation year in which the services were rendered.
Where an employee of a subcontractor provides services, the employee must be resident in Québec at some time during the taxation year in which the services are rendered.
The computer-aided special effects and animation expenditures must be reasonably attributable to services rendered in Québec by individuals resident in Québec at some time during the taxation year in which the services were provided.
Expenses giving entitlement to the credit
Production costs
Film or television production costs may include:
- production fees and general administration costs, provided these expenses are actually incurred
- an amount equal to the depreciation expense respecting the use of property in the course of the production
Amounts included in production costs must be incurred and paid by the time the corporation applies for the credit.
Labour expenditures
As a rule, labour expenditures are amounts that are included in the production cost, cost or capital cost of the property, as applicable. They must be reasonable in the circumstances and must be paid by the time the corporation applies for the credit.
The following amounts are labour expenditures:
- the salaries and wages incurred during the year that are directly attributable to the property and relate to the various stages of production (from the script stage to the post-production stage, or for a longer period judged reasonable by the Minister)
- the portion of the remuneration, other than salaries or wages, incurred during the year in connection with the above-mentioned stages and paid to
- an individual, for services rendered directly by the individual or by one of the individual's employees
- a partnership or a corporation (other than a corporation that has a broadcasting licence or is not dealing at arm's length with a corporation that has a broadcasting licence)
- the reimbursement to the parent corporation of an expenditure incurred by the parent corporation, provided the expenditure would have been a labour expenditure for the corporation applying for the credit if that corporation had itself incurred the expenditure
Labour expenditures and production costs incurred subsequent to post-production stages must be incurred no later than 18 months after the end of the fiscal period that includes the recording date of the first trial composite of the film.
Production costs and labour expenditures are reduced by any amounts of government or non-government assistance. For the purposes of the credit, the following amounts (among others) are not considered government or non-government assistance:
- the tax credit for Québec film productions
- financial assistance granted by SODEC, the Canada Council for the Arts or the Canadian Independent Film and Video Fund
- financial assistance granted by the National Film Board of Canada
- financial assistance granted by Telefilm Canada in accordance with the Canadian Film Development Corporation Act, other than a subsidy granted by that body under a dubbing and subtitling assistance fund
- financial assistance granted by the Canadian Television Fund under the Licence Fee Program or the Equity Investment Program
- financial assistance granted by the Fonds de développement économique de la région de la Capitale-Nationale (since January 30, 2000)
- financial assistance granted by the Conseil des arts et des lettres du Québec (CALQ)
- assistance granted in the form of federal tax credits for film or video productions or for film or video production services
How to apply for the credit
To apply for the credit, the corporation must complete form CO-1029.8.35, Crédit d'impôt pour les productions cinématographiques québécoises, and enclose the form with its income tax return or file the form no later than 12 months after the filing deadline for the return.
The return must also be accompanied by a copy of the favourable advance ruling or the certificate issued by SODEC with regard to the production. (The certificate must not have been revoked.)
